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Commercial Assurance

April 23, 2013

This year’s IACCM Europe Forum kicked off with a workshop on Commercial Assurance.

Delegates were alerted to the growing concern by executive management over the quality of commercial awareness and judgment. However, they were then warned about the challenge (highlighted in last week’s blog on The Declining Role of the Contract Manager) that faces the incumbent contracts and procurement community – too often seen as part of the problem, rather than being key to a solution.

This generated a lively debate over the role of contracting in identifying and driving change. For example, if a commercial group undertakes analysis and discovers that sales compensation is resulting in consistent over-commitment and financial losses, will the organization welcome this news?

There are many insights to be gained from analysis of the contracting process and of contracts themselves. Simon Chard form PwC offered some excellent examples in the meeting. But is it the role of contract management or procurement to highlight the areas of weakness caused by other functions, or by internal measurements, policies and practices?

To my mind, the answer is clearly yes. Executives cry out for more leadership. They want improved analysis, driving greater quality and improved business performance. Contracts staff are in a highly privileged position, having insight to many areas of the business and controlling one of the key economic and risk assets.

So we must consider how we ensure that contract and commercial models and standards are ‘fit for purpose’ – i.e. supporting business strategy and goals. And that means we have to propose new models, based on analysis of problems and performance. We need to understand how the terms we use affect behaviors; we need to explore the impact of contracts on relationships and in particular where revenue and savings are lost as a result of weaknesses in the process.

The workshop explored all of these areas and offered many examples of possible improvement. The opportunity is there, waiting to be grasped ….

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